A fundamental shift is taking place all around us. The old paradigm has flipped. More and more, today’s businesses find that, rather than asking or forcing individuals to step into line with the organization’s needs, they must adapt and transform themselves to attract the right people, keep them, and inspire them to do their best work. What is the context driving this paradigm flip? We see four main factors.
First, capitalism is reinventing itself. It is responding to some fundamental challenges. The most obvious is the financial crisis of 2008, when our inability to control global financial capitalism was starkly revealed. In our view, we are still far from solving the deep issues raised by the crisis regarding the purpose and structure of the corporation. (For some historical perspective, it was seven years after the Great Crash of 1929 that J. M. Keynes published “The General Theory of Employment, Interest, and Money.”) Economists still are perplexed by the crisis of 2008. What is clear is that these issues cannot be resolved by regulation alone. Organizations must rediscover their moral purpose, and the ongoing, vigorous debate around corporate governance reflects this concern. Neither the American nor the European model has proved adequate to the scale of the problem. It stands to reason, however, that if capitalism is to successfully reinvent itself, then rethinking organizations must be an important part of that reinvention. In fact, a big part of what’s directly forcing the reinvention is that individuals are rethinking their relationship (or contract, if you will) with organizations. And they are not demanding less of organizations, but more—more accountability, more opportunities for self-expression and development, more transparency, more responsiveness—beyond the basic demand to earn a living.
Second, global shifts in the nature of economic power reveal that within a few years, emerging markets such as China, India, Korea, Indonesia, Brazil, Russia, and South Africa will constitute an estimated 70 percent of world growth—with China and India alone accounting for 40 percent of that growth. Further, these facts remind us that the capitalist enterprise can take many forms. Consider, for example, that the world’s fastest-growing capitalist economy, China, is under the control of the Central Committee of the Chinese Communist Party. Moreover, two of the largest banks in the United Kingdom are majority owned by the state (the economic crisis achieved what a hundred years of social democracy could not!). And Singapore, with a tremendous record of sustained growth from unpromising beginnings, looks like a quintessentially capitalist society—until you delve into the ownership structures of some its most influential organizations. There you will find the hand of the state powerfully evident.
None of this is quite what we might have expected! It’s not long ago that people were predicting that liberal capitalism would dominate the world and constitute the “end of history.” Organizations now confront a world of complexity and diversity, where old certainties are shaken to their core. At the level of the individual, that means old assumptions about employment and careers no longer hold, yet a prevalent new pattern is difficult to discern. For example, the desire to belong to a community seems as strong as ever, but the nature of that community is changing. Corporate communities, in particular, are increasingly global, multicultural, and—at least in some respects—virtual, with their memberships changing ever more frequently. This profound shift has resulted in communities that are more dynamic and diverse, and in which knowledge and power is more broadly distributed.
Third, rates of technological and scientific change—faster than ever before in history—have reframed the context. Nanotechnology, genetics, neurophysiology, and biotechnology all will change our world. And, of course, the exponential rise of social media and the capacity of organizations to mine big data are in and of themselves major forces for radical change. Some have even argued that the “second machine age” is producing a “hollowed-out labor market” with a rapid growth of high-value, high-discretion jobs and a simultaneous growth of low-level, low-skill jobs, leaving us with a squeezed middle.
Life at the bottom of this occupational structure may feel very unfair. Others have gone further, claiming that platforms are replacing corporations as the focus of economic activity. Although there may be cross-cultural variations in the way businesses tackle these fundamental issues, the Internet means that organizations increasingly are judged by global standards. Transparency becomes not just nice to have, but rather an organizational imperative driven by the impact of technology on communications. Somewhat paradoxically, globalization has made us all both more differentiated and more connected.
Fourth, many mature economies face a demographic time bomb: their workers are aging, so there are practical questions about how pensions will be funded in the future. But there are also social questions: Huge increases in the number of older citizens will mean a rise in medical costs to treat the physical and mental problems associated with age, such as dementia and diabetes. At the other end of the demographic scale, sustained high levels of youth unemployment may produce a disaffected and alienated generation. Without the socializing experiences of work, these young people become much more likely to develop mental health issues such as depression and addiction. Even for those who find work in organizations, aspirations have changed. The research on generations shows, at the very least, that the psychological contract between employee and organization has shifted considerably. In many economies, the indications are that by 2020 Gen Y will compose around 50 percent of the workforce. Although we hesitate to generalize, what is clear is that among this cohort, the organization man is dead. Younger employees increasingly are attracted to organizations whose values they can identify with. But it is not just the young—for a long time now we have known that middle-level, middle-aged managers are increasingly disenchanted with corporate spin.
It is fashionable to argue that organizations are not changing as fast as their environment. But the truth is that capitalism has shown itself remarkably adept at reinvention. The move from mercantile to industrial capitalism, the rise of the joint stock company, the development of financial capitalism, the growth of international and, later, global enterprises—all are evidence of the chameleon-like quality of capitalism.
To our minds, the business organization shares this quality, and that constitutes grounds for optimism. At a fundamental level, people want to do good work in organizations in which they believe. Indeed, we subscribe to the view that the capacity for work is a species-defining characteristic. Among the higher primates, only human beings have the capacity to work in organizations and the ability to derive huge satisfaction from it. But that potential for satisfaction too often goes unrealized, at a cost both to us as individuals and to the organizations we work for.
Who, specifically, will respond to the challenges and opportunities we have alluded to? It can only be organizations. But organizations themselves, of course, don’t act. Rather, the world of organizations is made and remade through the actions of the individuals in them. Epicurus said that the proper subject of history is the actions of individuals operating in the real world. To put this in practical terms, organizations may not act, but they do offer opportunities and constraints. The task is to maximize degrees of freedom and eradicate unnecessary restrictions. This is a job not just for leaders but also for individuals throughout organizations. The shared agenda for all of us is to help answer Why Should Anyone Work Here?
Adapted from Why Should Anyone Work Here? What It Takes to Create an Authentic Organization by Rob Goffee and Gareth Jones (Harvard Business Review Press, November 2015).
Rob Goffee is Emeritus Professor of Organizational Behavior at London Business School, where he teaches in the Senior Executive Program.
Gareth Jones is a Fellow of the Centre for Management Development at London Business School and a visiting professor at Spain’s IE Business School in Madrid.
Goffee and Jones consult to the boards of several global companies and are coauthors of “Why Should Anyone Be Led by You?” “Why Should Anyone Work Here?” and “Clever,” all published by Harvard Business Review Press.
